New South Wales economic growth, as measured by volume estimates of Gross State Product (GSP), was the lowest of all the states and territories in 2004–05 and 2005–06. Over the last five years, NSW economic growth has been lower than Australia's Gross Domestic Product (GDP) by between 0.7 and 2.6 percentage points. New South Wales GSP per capita at $45,600 is still one of the highest in Australia, however, the gap between Australian GDP per capita and NSW GSP per capita has narrowed over time.

In understanding economic growth it is useful to look at the contributions of different industries to growth in income. Total Factor Income (TFI) represents the value added by factors of production such as labour and capital. It is equivalent to gross domestic product less taxes plus subsidies on production and imports. In the six years to 2005–06 the TFI of NSW industries grew by $78.4b (38.5%) to reach $282b in current price terms.

The Finance and Insurance Services industry ($12.5b or 15.9%) and Property and Business Services industry ($11.8b or 15.0%) contributed the most to the total growth in income over the period. Together these industries shared in 31% of NSW TFI growth. Manufacturing, which had a similar level TFI to the Finance and Insurance Services industry in 2005–06, grew by a smaller $5.3b (6.8%).

Industry Contribution to Total Factor Income Growth, Current prices – 1999–00 to 2005–06

The growth rates of individual industries, together with their size, underpin the different contributions to overall growth in the NSW economy.

Property and Business Services is the largest industry in NSW and its growth in income matched the industry average of 5.6% annual compound growth in TFI. The Finance and Insurance Services industry grew at a faster rate (9.1% per annum) and because of its size (the third largest industry in NSW) had a significant impact on overall growth in TFI. The Manufacturing industry grew at a slower rate (3.2% per annum) and consequently had a smaller effect on overall TFI growth relative to its size as the second largest industry in NSW.

The Mining industry had the highest average annual growth rate (12.5%) over the period, particularly in the previous two years (31.8% per annum since 2003–04). However, due to its relatively small size in NSW, Mining contributed less significantly to the NSW economy than has been evident in other states such as Western Australia.

Total Factor Income, By industry, average annual compound growth, current prices – 1999–00 to 2005–06

Employment Growth

While the Finance and Insurance sector was a significant contributor to growth in TFI, this was not reflected in employment growth for this sector. The industries that increased employment the most between 2000 and 2006, were Property and Business Services (69,000 jobs) and Retail Trade (61,300).

Between 2000 and 2006 the number of jobs in NSW grew by 262,000 to reach 3.29 million jobs.

Over 92% of the job growth was for higher skilled occupations (skill levels 1 and 2 of the Australian Standard Classification of Occupations (ASCO)). The skill levels of jobs are determined by a combination of formal qualifications and experience, and relate to the requirement of the position rather than the actual qualifications of the person employed.

During 2000 to 2006, occupations requiring a skill level of ASCO 1 (graduate degree or equivalent experience) showed the largest increase of 166,600 jobs (63% of total jobs growth). Jobs requiring a skill level of ASCO 2 (diploma or equivalent experience) also grew strongly (75,000 jobs or 29% of total jobs growth). The number of jobs requiring skill levels of ASCO levels 3, 4, or 5 (trades qualification equivalent or Certificate III or IV and below) were relatively steady, resulting in a decline in their proportion of the growing job market.

It should be noted that lower jobs growth for particular skill levels does not necessarily reflect a lower demand for these occupations, as some demand may be unmet.